- Useful Real Estate buyer and seller information
Buyer’s walk away or can’t qualify after inspection reports …now what?
So the sale fell through after pest and structural reports came back with $20,000 in suggested repairs. Depending on the buyer, seller and agent this may or may not be a deal breaker.
The seller and buyer have options. The purchase agreement allows for a pre-negotiated amount of money the seller agrees to be responsible to pay for potential repairs. It is an estimate only, and depending on the condition of the property, the amount can be zero if the sale is “As Is” or $10,000+, this amount is agreed to prior to acceptance of the purchase agreement. Basically the amount is a estimate at best until inspections are preformed and a bid for repairs is completed.
Upon receipt of the inspection reports and suggested repairs, additional inspections may be suggested such as mold, roof or chimney inspections. The completed reports are given to a licensed /qualified contractors or maintenance companies to bid on the repairs noted which buyer deems necessary.
What happens if the repairs exceed the amount of money agreed to?
There are options, the buyer can pick up the additional expenses, the seller can pick up the additional expenses, seller and buyer can split or negotiate a new number or the buyer has the right to walk away.
When buyer and seller agree to renegotiate the repair amount – Repairs options include, (1) Repairs completed prior to closing (2) Holding funds in an escrow account with a title company, title agrees to pay for repairs with held funds as repairs progress after the transaction closes (3) Buyer agrees to seller crediting back funds towards repairs at closing.
What happens if the buyers walk away?
The seller and agent now must disclose to future buyer’s the repairs needed or the seller may decide to make the repairs to remove the issue for future buyers. This is not to imply the next buyer is going to skip inspections when they purchase especially if reports are over 6 months old. There is always a possibility of additional repairs probably minor ones which may or may not be needed.
Cosmetic repairs such as paint and carpet are not considered true “repairs” .
What happens to the seller with repair inspections and the deal doesn’t close?
Inspection reports, as agreed to in the purchase agreement are given to the seller and buyer during the transaction. If the buyer decides not to close for whatever reason, the seller and agent MUST disclose any problems discovered in inspection to future buyers.
Seller’s may decide to make some repairs and leave other repairs for future buyers to deal with and leave it as a point of negotiation for future buyers.
Upon listing a property for sale, seller’s fill out a “seller’s property disclosure statement”, to the best of their knowledge a seller fills out the current status and history of past problems..
Seller’s can decide to pay for inspections prior to listing. An evident pest problem is a good example when a seller may want an inspection to make repairs prior to listing. These reports and repairs are a plus for future buyer’s who may or may not require a new report.
Chris and I always encourage seller’s “when in doubt- disclose it out” ! We do not encourage a seller to pay for inspections prior to listing unless there is a an obvious problem. Otherwise we tell seller’s to let the potential buyer perform the inspections.
Example:
A recent town home sale which came back on the market after being under contract, it did not close because the buyer couldn’t qualify for the loan (another article). The seller had completed repairs from inspection reports (estimated cost to seller of $4,000). The repair reports were made available to my buyer when we presented an offer. My buyer wanted new inspections and make sure repairs were done correctly. The main problem was mold growth under the unit. Unfortunately the repairs were not done correctly for mold remediation. The seller agreed to pay for a second mold removal with licensed contractor who specialized in mold removal. The transaction was extended 30 days and the buyer was satisfied and
the transaction closed.
